Examination of Witnesses (Questions 554
- 559)
TUESDAY 22 JANUARY 2008
Professor David Metcalf and and Mr Mark Franks
Q554 Chairman:
Thank you very much, we are most grateful to you for coming to
help us with our inquiry. I am always asked to say to anyone who
comes, will you speak up and speak clearly and relatively slowly,
so we get as good a record of your answers as we can. I wonder
if you would, before we start, like to introduce yourselves for
the benefit of the broadcasters who are recording this session.
Would you like to introduce yourselves, and then we will get on
with the questions.
Professor Metcalf: I am David Metcalf, I am
the Chair of the Migration Advisory Committee and I work at the
London School of Economics.
Mr Franks: I am Mark Franks, I am the Secretary
to the Migration Advisory Committee which means that I manage
the small team of officials and analysts that support the committee.
Q555 Chairman:
Do you want to make a statement before we start or can we just
go straight into the questions?
Professor Metcalf: I discussed this with Mark
previously and, on balance, decided not to make a statement because
we think anything to do with it will come out in the questions.
Q556 Chairman:
That is absolutely fine. If I may start, I wonder if you could
outline how the Migration Advisory Committee will define and identify
labour and skills shortages in the United Kingdom. You might in
the course of your answer just touch on the question of Tier 1
and Tier 2 and so on because some of us know about it but others
are less clear.
Professor Metcalf: Let me touch on Tier 1 and
Tier 2 at the very beginning then. Tier 1 is essentially, from
the supply side, very highly skilled migrants being able to come
without a job offer, depending on their qualifications and their
earnings in their home country. Tier 2 is on the demand side.
Tier 2 requires the employer to be on the sponsors register and
for the person who is coming to have a job offer, so it is analogous
to—it is not the same as—the present work permit system.
Within Tier 2, as we probably will get to in later questions,
there are essentially two mechanisms by which people will be able
to come in. There is one set of mechanisms which gives automatic
entry, including if MAC defines the occupation as a shortage,
but there is another mechanism where, if an occupation is not
defined as a shortage occupation, nevertheless providing you meet
certain requirements, particularly the thing that is called the
resident labour market test, the individual will be able to come
in, subject to meeting the points criteria. If I have not been
clear perhaps you can ask questions.
Q557 Chairman:
We will come back to it.
Professor Metcalf: In terms of defining the
shortages—many of you are economists and have dealt with
difficult questions—the whole notion of shortages is a bit
of a slippery concept. You would expect an equilibriating mechanism,
so you would expect in time that there would have been some price
changes, in this case wage changes, to eliminate the shortage,
but it may take time and wages might be sticky, that would be
true in the public sector, it may take time for an employee to
acquire skills. You would expect, as you move towards some sort
of equilibrium, a shortage occupation should be exhibiting rising
employment, rising relative pay, and low or falling unemployment.
That is the concept. How to identify it? First of all, of course,
one has got to look for the alternative sources of the labour
supply. Up-skilling of the unemployed or the existing workforce,
possibly from the EU, possibly family reunions, and of course
other immigration. The MAC will influence some immigration, but
the new Tier 1—there will be a lot of very highly skilled
people coming through that; there is also the question of the
existing work permit holders, for example, what happens to them
in the transitional arrangements? The numbers there will potentially
form an alternative source of labour supply, so the first thing
you have got to do when considering this is to look at the alternative
sources of labour supply. But, having done that and thinking about
the shortages, we have converged to essentially two ways of thinking
about it and then to try and dovetail them together, what we have
called top down and bottom up. Top down is using national data,
things like the Labour Force Survey, the ASHE (the earnings survey)
for example; considering then by occupation at as fine a level
of disaggregation as you can get—as an aside, that is a
problem—but considering things like wage changes, relative
wage changes, returns to education, returns to particular qualifications—that
is on the prices side—then on the quantities side things
like vacancies. One of the members of the committee has done a
lot of what in the old days would be called manpower planning—and
we are not a manpower planning committee, I make that very clear,
but in terms of thinking about movements in labour supply and
labour demand by occupation he has got considerable expertise
and it may be useful to use that—possibly looking at the
extent of overtime hours and changes in overtime hours, earlier
promotions and so on and training expenditure. There are a lot
of indicators; that is the top down. We also want to do bottom
up for a number of reasons. One reason is that on the top down
you are not going to be able to disaggregate very much beyond
what, in the jargon, is an occupational classification of four
digits, essentially a civil engineer, for example. You will not
be able to get down to, let us say, contaminated land engineers,
which is a present shortage occupation, so the level of disaggregation
is limited, hence the bottom up. In the bottom up, as you know,
the sector skills councils—which I used to know as industrial
training boards—have done a lot of good work in terms of
being very careful and enhancing our understanding about their
labour markets, and it is they, through advisory panels, who presently
feed into the work permit people, the Home Office people, about
their particular labour markets, and that gives some hint about
how the work permits should be defined when they are thinking
presently about shortages. We are going to go about doing the
work slightly differently, but I very much want to draw on the
expertise that these sector skills panels have got. I used to
be, as Lord Turner knows, a member of the Low Pay Commission and
we always made sure that we visited all the regions of the country
in a year; we are going to do that on the MAC. We have to report
by June, so we will do that before June because you have got to
see what is happening. We will also have a stakeholder panel and
forum, so there are plenty of ways of trying to make sure that
we get something a little bit more finely grained than the top
down method. We will revise the shortage occupation list—that
may come up later—in due course, but the dovetailing of
the top down and the bottom up is a challenge. In terms of the
four digit occupations, the most disaggregated you get is 353—they
are called unit groups—things like civil engineer, but within
that there are 26,000 job titles, within the 353. In many ways
people think about shortages, as in contaminated land engineer,
BAA aeronautical engineer—they think about shortages at
that level of disaggregation, so dovetailing those is going to
be a task which we will have to deal with when we get properly
to work. We have only had one meeting; we were only properly established
in late November.
Chairman: Thank you very much. Lord Lawson.
Q558 Lord Lawson of Blaby:
Professor, you said two things which I thoroughly agree with.
First of all, this whole shortage idea is a very slippery concept
indeed and also it is really going back to manpower planning,
which is not a thing to do in a market economy. May I ask you
two related things? First, shortages of any kind, whether they
are shortages of materials or shortages of people, are normally
filled by the market forces in a market economy, and in this context
the "market" is really the whole of the EU, as far as
we are concerned. Do you think it is reasonable to say we will
wait and see for a fair bit of time to see whether the market,
through rates of pay or whatever, will sort out the shortages
there are before we go to the immigration route, and if so, how
long would you wait? The second question is this: many of the
shortages will be short term, temporary shortages, and the system
of immigration that we have in this country—and I am not
aware of any proposed change—whereas many other countries
do have temporary immigration, in this country whilst it is immigration
for work it gives a permanent right of settlement. There is, therefore,
would you not say, a rather curious mismatch that you are going
to find in that you have said yes, these people can come in for
a shortage which is purely temporary?
Professor Metcalf: On "wait and see",
that is the merit of using so many different indicators, because
if you use the top down indicators and you are looking both at
prices and relative earnings movements and you are looking at
many of the quantity indicators, if you get a whole array of indicators
really suggesting that there is a shortage, that hints that we
probably have already waited a little. On the short term, that
is a very important point and a very good example of that is what
has happened in health where we did have, on the shortage list,
for three or four years a very large number of medical occupations—doctors
and lower occupations like nurses and others below doctor level—but
because now we have trained the requisite number of people the
shortages has been alleviated.
Q559 Lord Lawson of Blaby:
There is a surplus now; they cannot find jobs in the UK and they
go abroad.
Professor Metcalf: It is a nice question, but
I am not sure that one would have wanted to wait and see in terms
of filling, albeit in the short term, any of these doctor posts
or nurse posts because it made, of course, considerable difficulties
for the operation of the health service.
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